Hard times: Despite record corporate profits, wages are being frozen

Sen. Jim Inhofe recently revealed that he was initially intrigued by arguments concerning the human contribution to global warming, but changed his mind when he realized the potential costs to business. In other words, what he wanted to be true colored what he saw. It’s like denying cancer because you hate chemotherapy.

Something similar seems to be occurring in the debate over economic inequality.

Consider that between my graduation from high school in 1979 and my son’s graduation last year, American productivity rose a whopping 75 percent. Average wages, however, rose only 5. In other words, we’re making so much more and getting so much less.

Of course, we feel better off today and certainly have more stuff. But that’s due to technological advances that every generation benefits from. Ours, however, enjoys a smaller percentage of the total output than our parents and grandparents before us, and we often rely on two incomes to do so. We’re also more likely to be in debt.

At the same time, the cost of important things like health care and higher education has skyrocketed (education outpaced the consumer price index by 385 percent). And even that 5 percent increase isn’t distributed evenly. A larger share accrues to the top 1 percent of earners than ever before and unskilled labor is losing out altogether.

Yet many politicians and pundits continue to talk about inequality in moral terms (the “moochers” versus the “job creators”); report rumor as news (“someone called in that a woman just bought a car with food stamps!”), and engage in misleading exposés, like John Stoessl’s on panhandlers; none of which takes into account the structural changes that affect us all.

In 1965, for example, CEO to worker compensation was 20-to-1. In 2012, it was 273-to-1. The wealthiest 1 percent of Americans captured 95 percent of the income gains in the first three years of the economic recovery. Despite record corporate profits, wages are being frozen. Moreover, they are no longer “sticky downward,” but rather falling fast. Those that do rise don’t keep pace with inflation. If the minimum wage had, it would be almost $22 today.

A Forbes contributor cleverly measured our decline in relation to gold. He found that today’s minimum wage earner works 12 percent longer to earn a gallon of milk than his grandfather did in 1965, while a senior engineer works almost two times as long for a gallon of gas.

Given that we can produce more per hour than our grandparents’ generation, it stands to reason that our wages ought to buy more as well. Ironically, he observes, the opposite is too often true. Noting that “incomes are about 1/10th of what they were in the 1960s [as] people who work for a living are being steadily and severely marginalized,” he calls the situation “ugly.”

If we look at the poor, who suffer most under these structural changes, the situation is even uglier. One in six Americans struggle with hunger. Almost 16 percent of us are uninsured (48 million people). Medical bills are the leading cause of bankruptcy.

Hey wait, you may say. Don’t we have a welfare state that compensates for all of this? In part, of course, that’s true. But then, there are two things you need to know about the American welfare state. The first is that it gives more to those at the top of the income ladder than those at the bottom. A full explanation will have to wait, but suffice it to say that no less than The Economist magazine, a staunch defender of the free market, called the situation “perverse.” The second is that it is under attack.

Low wages affect more than just the poor, however, as illustrated by the controversies surrounding Walmart. A Berkeley study found, for example, that low Walmart wages cost California taxpayers $86 million a year (in things like food stamps and Medicaid). Nationwide it has been estimated at $2.66 billion. Walmart’s success, then, depends in part on what could be called government subsidies, something it seems to recognize, since their managers encourage employees to avail themselves of public assistance as part of the company's operating procedures.

Yet Walmart is the third highest revenue grossing corporation in the world, providing six members of the family with a net worth of $144.7 billion, which is more than the combined wealth of 42 percent of American families.

Unfortunately, none of these numbers capture the human faces behind the statistics. You have to imagine them. They may, however, help us see through the attempts at denial.

Mary Barker teaches political science at Syracuse University's study abroad program in Madrid, Spain, and at the Universidad Pontificia Comillas. She is currently on leave to conduct research and is teaching at Salt Lake Community College.